By Douglas Kruger
WE may think of ourselves as a small economy. But mythologies matter. The story we tell ourselves, about ourselves, informs the way we behave. And “small”, it turns out, is no deterrent in the prosperity stakes.
Small economies are disproportionately represented in global per capita income. Henley & Partners rate Jersey’s gross national income per capita among the highest in the world. Work hard, work smart, and there is no reason you can’t prosper here.
And it’s no state secret. It’s why more than half of us weren’t born in the Channel Islands, but arrived with our satchels and our hopes.
This year, the Island has fared well on several important fronts, most notably the MONEYVAL report, elevating our global attractiveness.
But as Jersey Business points out, we are lagging, even decelerating, when it comes to productivity. And the continual haemorrhaging of construction companies, casualties of rising costs, is another trend in the wrong direction.
We need a shift toward a growth mindset. We need to tell ourselves a better story. We need to stop living in the shadow of Goliath, start betting on David.
The general conditions for growth are not complicated. Provide decent infrastructure, remove constraints, and humans will do astonishing things.
But it’s all too easy to dampen the flame. Get a few basic things wrong, and it all sputters out.
Economic dampeners can be as simple as a mindset we teach our children: “This is a small place with no prospects.”
Or they can be as complex and multifaceted as overreach by state bodies. Ideally, such bodies should uphold law and order, enforce contracts, provide infrastructure, then scamper on out of the way, leaving their people to get on with it.
But they don’t. The temptation to engage in social engineering and trendy fads can be too great to resist.
And then there’s the desire to meddle and make up rules, shrinking freedom while growing cost. Do we need more paid officials to tell us which of our own trees we may trim? Or which side of a counter a proprietor may or may not stock their pies?
That level of interference is dangerous for any economy. But the effects are more pronounced in a small one like ours.
So, what might an ideal version of Jersey look like? What could be done if an already robust economy were supercharged for growth?
Here are three ways to retool our talented Bailiwick for accelerated prosperity:
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Shrink the government
Reduce it by half.
If your goal is to blast oxygen into the furnace of free enterprise – and it should be – then you must create a vacuum for trade to fill. Government is currently doing too much.
Our oversight in Jersey is notably more ethical than most. You may trust the testimony of someone who hales from Africa. But over the past few years, they’ve increasingly positioned themselves to fill every gap, meet every need, resulting in unchecked expansion.
Free enterprise does it better. And cheaper. That is, provided government doesn’t hold an existing monopoly. Given scope-creep by the state, that monopoly expands indefinitely.
Now imagine a sort of “reset”, by which the state contracts back to a functional minimum. Statists gasp at such treason, but it works. So much so that you can study it in real-time within a single economy: the USA.
Observe state-smothered California, going backwards for the first time in a century, with a negative population-growth rate, and a mass exodus of businesses to less restrictive states.
Compare it to the meteoric rise of Texas, with its dramatically lower tax and regulatory burdens. It’s a magnet for new business, just the way we could be.
Where governments uphold law, then get out of the way, their people prosper. New investment comes knocking.
It’s easy enough to prove. What’s harder is getting governments to do the necessary shrinking. Unsurprisingly, they don’t like to hear that their most useful contribution is less involvement. And short of a dramatic act by fresh leadership, they never shrink themselves.
That’s why we should:
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Recalibrate ministerial powers
Specifically, give more to the minister overseeing economic development.
What does that mean in practice?
Let us assume a scenario in which our Chief Minister weighs the concerns of all ministers and their departments equally. Very egalitarian. But it’s a problem. Such apparent fairness would mask a fundamental flaw.
It would mean that any trendy boondoggle, or stifling “planning permission committee”, would enjoy equal priority when weighed against growth initiatives.
In practice, that means nothing would ever get done.
We need an imbalance, in favour of growth.
Let economy lead. Doing so would institutionalise a growth mindset at the level of national planning. It would also weaken opposing stiflers; in the interests of island prosperity.
That done, we should:
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Build the tunnel
Infrastructure matters to prosperity. That’s a legitimate government input.
Our inability to move labour, supplies and expertise to and from the Island quickly and easily slows everything. Slower means more expensive. Once these things finally get here, they face heavy legislative burden and the nightmare of planning committees, licences, permissions and fees – piling cost upon cost.
The solutions are freedom and movement. Speed and ease reduce cost. And not by a little.
Then add in the effects of freer competition. Underlying expenses could be slashed by half. Even our monstrous rental costs would yield before easy commutes and an abundance of nearby land. We would not believe the difference. And our failure to believe is precisely what is costing us that difference.
As it stands, it’s not that we can’t afford a hospital plus a tunnel. It’s that we can’t afford a hospital because we don’t have a tunnel. Solve the root cause of disproportionate cost, and a great many new things become feasible. Connectivity is a hundred years overdue. We need to start betting on growth, then organising for it.
Small can be mighty. Small can punch well above its weight. Our already industrious island could be vastly more entrepreneurial. Are we betting on a Bailiwick that conquers giants? We can and should.
It all begins with the story we tell ourselves about ourselves.
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Douglas Kruger is a global speaker, and the author of the bestselling books “Poverty Proof”, and “Is Your Thinking Keeping You Poor?”
